Does optimisation actually improve your bottom line?

You have probably heard or said it before. “We need to optimise our processes.Do things smarter and become more efficient.”

Maybe you have experienced employees do not always welcome new initiatives.Or maybe you yourself have endured having unnecessary procedures imposed on you.

When revenue recognition, approval of time registrations and budget follow-ups fill the work day, it can be overwhelming to dedicate time making everything work smarter.

In the end, you may have a sneaking suspicion your efforts do not even improve the bottom line.

As we had the same suspicion, we asked one of Europe’s leading process maturity experts:

Is it actually worth the effort to optimise our internal processes?

Expert in process optimisation with deer in the garden

We meet the expert Jørn Johansen in Whitebox’ office north of Copenhagen.Usually, deer pass by just outside the windows, and a special quietness rests over the office building.

Jørn is a partner and ”the scientist” in the consultancy Whitebox. They evaluate companies’ ability to do product development, project delivery and advises managers in development projects.

When we meet him, we quickly discover he doesn't throw lofty words around.But with a kind and accommodating look and a researcher’s reservations towards imprecise claims, he proceeds straight to the core of the question.

40% rework

”Yes, it does”, is the short answer from the expert.

”When we talk about optimizing processes, we are actually talking about maturity within the company.And maturity brings a lot of advantages.Amongst other things, we see that in the less mature companies around 40% of all work being done is actually rework”, he explains.

With an experience that stems from more than 300 evaluation projects, Jørn Johansen has seen how immature or lacking internal processes can hold companies back.

"If you improve from level 1 to level 2 on the maturity scale, you go from 40% rework to 20%. And the curve continues as you become better.It frees up hands for people who would otherwise be doing rework. They can then do something more valuable.”

When Fortune 500 does it…

The maturity scale is part of an internationally recognised maturity model, that places companies on different 5 maturity levels.If you are at the lowest level, the internal processes are not followed (if any actually exist), and you can forget about being able to predict anything within your business.

On level 5, all processes are optimised, and you constantly work on optimising and learning more.

In the Nordic countries, the average is around 1.5 and 1.75.

The most mature companies have a 45% higher bid-to-win ratio than average.

”60% of Fortune 500 companies use this maturity model to improve. So you can ask yourself whether or not it is working”, the researcher asks rhetorically with a wry smile.

”Maturity is basically about how well you are coming through on your projects.You are measured against best practices from the world’s very best companies.”

Less rework is just one advantage of optimising your company's processes.

Both a requirement and competitive advantage

Today, we see industries where companies demand a certified maturity level of 3 or higher from their suppliers in order to do business with them.E.g. the defence industry requires high standards from their suppliers.

Moreover, the most mature companies win their bids 45% more often than the average company. You can read this in SPI Research' big 2018 benchmark report.

This does not surprise Jørn Johansen.

”Naturally you would rather do business with a stable and predictable company, where you are confident they can deliver.And this is why these companies win more offers”, he explains.

Mature companies are trending in China

Halfway through the interview, Jørn's partner and CEO in Whitebox, Per Hartlev, enters the room.Through 30 years he has worked as a manager on all levels within project development. Lastly as CEO in the Danish company DELTA.

“Did you talk about the China trend yet?”, he interrupts with anticipation in his voice.

”In China, 2/3 of all maturity analysis are performed, because companies cannot attract new employees if they do not perform at level 3.Employees do not want to work in such a mishmash.”

You find the same conclusion in SPI Research’ 2018 report.Where companies with mature processes replaced 3.3% of their employees on a yearly basis, the average company had to replace 7.8%.

Nordic competition for talent

When we asked, if this trend can be transferred to Scandinavia, Jørn Johansen hesitated a bit.

”In general, it is difficult to get employees in companies that deliver and complete projects.You can look at the entire building sector, which hungers for people being able to manage projects.”

In Scandinavia, most companies fight to find talented employees.Especially Sweden is under pressure and experiencing a big shortage of qualified staff within industries like construction and IT.

”This also means that you become more picky as a future employee. If you could, wouldn’t you then rather join the best company than be working in a sandbox?”, Jørn Johansen asks.

Courage and the will to change

During the length of our conversation, more disadvantages about immature processes are considered.Low productivity, no opportunity to re-use from previous projects and poorly estimates on projects.

But if process optimisation is only advantageous, why doesn't everyone just do it?

“For many companies, there simply is not time, as they spent too much time extinguishing fires”, Jørn Johansen says.

In the Scandinavian market, the high demand for qualified staff means that the employees work beyond maximum capacity to keep up.

”If you are under pressure, it requires courage and the will to venture into the project.But you need to make a decision that this is what we choose to do.It requires management to get involved and see the optimisations an investment and a project in itself.

But as the level is generally low, you really gain advantages when moving ahead of your competitors”, Jørn Johansen ends.

Get vital key figures from SPI's 2018 report

SPI Research has investigated how consultancies can increase the profit through maturity.

The report has 244 pages, but if you do not have time to read it all, we have made a summary with the most important insights and key figures from the report.

You can get our summary and the report through the link below for free.

About Jørn Johansen and Whitebox

Jørn Johansen has worked with product development and maturity assessments in more than 40 years, and he is considered the industry's grand old man. He has managed several research projects about product development, how companies improve and outsourcing of development projects.

He has furthermore developed the ImproveAbility™ method, which is the standard with process improvement, and he took the initiative to the globally norm creating SPI Manifesto.

He is part of the team behind the consultancy Whitebox, which holds more than 100 years of experience with product development and has carried out more than 400 business evaluations. Together, they work for helping companies getting better at exploiting their growth potential.